The landlord Cohen Brothers Realty is asking for $25 million from two medical groups and a group of doctors who inked an approximately $1 million annual lease at 465 Park Avenue in Midtown but now have asked to back out of the deal, a new lawsuit filed this week says.
Cohen Brothers claims the Surgery Center of Manhattan breached its contract to take 13,312 square feet on the lower level of the residential building at the corner of Park Avenue and 57th Street, the suit filed in New York State Supreme Court on Tuesday, claims.
The East Village-based New York Eye and Ear Infirmary of Mount Sinai owns a 38 percent stake in the Surgery Center. Executives from Illinois-based Regent Surgical Health own 10 percent and 16 local doctors own the remaining 52 percent, state Department of Health records show.
The real estate company headed by Charles Cohen is seeking a $25 million judgment to cover an estimated $17 million in rent for the 16.5 year lease; as much as $4 million spent preparing the space for the medical office; as well as additional money for brokerage commissions and other costs, the court filing says.
The suit comes as the nation is undergoing a vast transformation of the business of heath care, which has led to an expansion of medical facilities in Manhattan. As of August, there were 13 ambulatory surgical centers in Manhattan, with six more approved but not yet open, data from the state’s DOH show.
Cohen Brothers purchased the 39,000-square-foot, multilevel retail condo unit at the base of the residential building at 465 Park Avenue in 2009 for $23 million.
In December, the firm refinanced its debt on the unit, increasing it from just over $17 million to $20 million, city property records show.
The suit also claims the defendants participated in a “fraudulent scheme” by “deliberately making false representations to [Cohen Brothers], both orally and in writing… that [the Surgery Center] had obtained a Certificate of Need from the New York State Department of Health.”
The center is required to have the certificate to operate in New York State, and the executives from New York Eye and Ear and Regents signed a document that triggered the rent commencement on August 1, claiming the state had issued the required certificate, court records show. Then in October, the surgery center requested to terminate the lease because, in part, the building “is not fully sprinkled,” and because of that, would likely not receive the required state approval.
The Surgery Center of Manhattan signed the lease with Cohen Brothers on Dec. 17 2012.
Cohen Brothers and New York Eye and Ear declined to comment. Regents did not respond to a request for comment.